Professional Documents
Culture Documents
0 ELECTEr
S JUNi2 1991"
Nancy C. Roberts
April 1991
Prepared for: Director, Net Assessment, Office of the Defense, Washington D. C. 20301
Competitive Strategies Office and Strategic Planning Branch, Office of the
Secretary of Defense, Washington D.C. 20301
Defense Policy Office, National Security Council Staff, Washington D.C. 20506
91 U 7 016
NAVAL POSTGRADUATE SCHOOL
Monterey, California
Nancy C. P6berts
Associate Professor
Department of Administrative Sciences
Reviewed by:
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16 SUPPLEMENTARY NOTATiON
The views expressed in this paper are those of the author and do not reflect the official
PolicyD or t, T7 -- n rnmpnt
*7 COSATI CODES 18 SBjECT TERMS (Continue an re~ese if necessary and oenriry oy block number)
FIELD GROUP SUB-GROUP
Strategic Management
Additional Sponsors: Competitive Strategies Office and Planning Branch within OSD,
and Defense Policy Office, National Security Council Staff.
bL
S/N 0102-LF-014-6603
Abstract
2
Working papers of the Naval Postgraduate School Department of Administrative
Sciences are preliminary materials circulated to stimulate discussion and critical
comment. The views stated herein are the author's and not necessarily those of the
Department of the Navy or the Naval Postgraduate School.
Li
Dist Special
LIMITATIONS OF STRATEGIC MANAGEMENT IN BUREAUS:
April 1991
Prepared for:
Director, Net Assessment, Office of the Secretary of Defense,
Washington D.C. 20301
Competitive Strategies Office and Strategic Planning Branch,
Office of the Secretary of Defense, Washington D.C. 20301
Defense Policy Office, National Security Council Staff,
Washington D.C. 20506
1
LIMITATIONS OF STRATEGIC MANAGEMENT IN BUREAUS:
Introduction
1983:566)1 2
The practice of strategic management is assumed to be trans-
ferable to all organizations. While some analysts acknowledge
2
one to view management as a universal process (Murray, 1983:63).
Furthermore, analysts have pointed to a convergence of sectors --
government and business organizations are becoming more similar
in terms of their functions, management approaches, and public
visibility (Bozeman, 1987; Murray, 1983; Musolf and Seidman,
3
tion of bureau policy; and bureau decision making.
The case of the Department of Defense is used as an illus-
tration in section three. Despite the extensive efforts of
strategic analysis, decision-making and planning within DoD, a
4
UNIQUE FEATURES OF PUBLIC ORGANIZATIONS
At the far left of the table we see two of the most common
distinctions between public and private entities: ownership and
5
0 o~
U
-x 0m
4
C = C
E-4 m 2- Cl
~2 E~ U & U
I%
C6I
- .2
as participants engage in economic exchanges of goods and serv-
ices between customers and suppliers.
At the other end of the continuum, polyarchy describes
bargaining and persuasion among those external to the organiza-
tion who have some degree of control over the organization. In
western democracies polyarchy involves a pluralistic political
process: multiple governmental authorities, interest groups, and
independent participants contest "the rules" and control through
the directives issued by government. And while participants may
6
Airbus has public ownership, private funding, and a market mode
of social control (Perry and Rainey, 1988:196).
These eight organizational types representing different
admixtures of ownership, funding and social control are hypothe-
sized to have differential impacts on organization functioning
and management (Table 1 column 2). Of particular interest for
this discussion is the functioning of bureaus. At least eight
organizational and contextual properties are expected to be
affected. The eight organizational and contextual properties
are: performance expectations; performance measures; legal and
formal constraints; external stakeholder influence; degree of
7
spheres of operation of bureaus compared to enterprises. Facing
otherwise.
8
And finally, bureaus are thought to be subjected to greater
public scrutiny compared to enterprises. Given greater stake-
organizational performance.
Objectives and criteria for evaluation in bureaus are
9
legal, statutory, and procedural controls noted earlier are also
a source for this limited authority. Under these conditions, the
role of the administrator is more circumscribed with limits on
his/her autonomy and flexibility. For example, merit principles
limit how administrators hire, fire, and structure the incentives
systems for their subordinates. Supervision is challenging as
clear objectives and standards of performance are difficult to
specify. Emphasis on controls is hypothesized to produce a
change.
Incentives and the incentive structure of bureaus are more
difficult to devise. Performance evaluations suffer from
performance objectives and measures that are vague or ill de-
fined. In addition, the merit system limits experimentation and
10
IMPLICATIONS FOR STRATEGIC MANAGMENT OF BUREAUS
Allison (1983) flatly states that "the notion that there is any
significant body of private management practices and skills that
can be transferred directly to public management tasks in a way
11
formulating organizational policy; 2) bureaus operate in a
political economy not an economic one and lack consensually-based
indicators to measure organizational performance; 3) the bureau
general manager has less autonomy and control compared to the
enterprise general manager to induce system coherence, integra-
tion and coordination during the policy implementation process;
and 4) bureau strategic decision making, as a consequence of the
above factors, is much more complex and uncertain compared to
enterprise strategic decision making.
12
of the others. Ambition must be made to counteract ambition"
(Quoted in Allison, 1983:80-81). Thus, in most areas of public
policy, responsibility is shared among individuals such as the
13
please your constituents in this job the 'ay you can please your
constituents in the private sector. You have to learn to live
14
provide the ultimate test of enterprise adaptability.
Adaptation to the environment is also of concern for bureau
management. Yet bureaus operate in a political economy. Politi-
15
charter, and current executive and legislative authority inter-
ests. In addition, court rulings, enabling legislation, and
newly elected administrations all produce directives that the
general manager and his/her subordinates are measured against
(Backoff and Nutt, 1990).
Unfortunately, these proxy indicators, as mentioned earlier,
produce a "jurisdictional jungle" (Levine et al., 1975). They
represent a confusing and often competing set of expectations.
With conflicting signals from the environment on what policies to
16
Policy Implementation
17
new policy are circumscribed by law and operate under a set of
guidelines established by the Civil Service and the seniority
18
are underdeveloped, and in many cases, non-existent. Bureau
systems are not intended to provide coherence. The concern is
for "justice, not efficiency; the preservation of liberty, not
the best use of economic resources; accountability and legitima-
cy, not efficiency and effectiveness" (Bower, 1983:174).
Strategic managers in public bureaus are quick to acknowl-
edge the limits in implementing policy and providing organiza-
tional coherence. Michael Blumenthal compared bureau with enter-
prise management and concluded that managing a large federal
19
Decision Making
20
ment is described a much more open, "fishbowl" experience. The
press coverage can be so intense and leaks of bureau delibera-
tions so pervasive that many policy initiatives are halted before
they get off the drawing board. While enterprise general manag-
ers deal with the press under exceptional circumstances (in the
case of oil spills and product tampering), it is a rare occasion
when the press has access to internal operations of a firm as it
21
rupted with very specific time frames for legislative mandated
implementation, and yearly congressional budget cycles. Says
organization. The Secretary does not initiate his own policy and
strategy. He participates in a fluid process with a complex set
of stakeholders. These stakeholders include: the President, his
staff, the National Security Council and its staff, international
22
Chairman and the Joint Chiefs, the Defense Agencies and Field
Activities, and the OSD staff itself. And in the Congress alone,
there are ten Senate committees and 11 House committees that have
formal jurisdiction over various aspects of defense policy
(Wildavsky, 1988:385).
strategy has been infrequent in the post World War II era (Brown,
1989; Hilsman, 1990; Sarkesian and Vitas, 1988).
Without a consensus, it is theoretically and practically
23
clear and direct policy guidance becomes the norm (National
Security Strategy, 1987; 1988; 1990). Managers in DoD, in
turn, are left to manage in a policy and strategy vacuum.
Forced to build on their own interpretations of the national
security interest, their hard choices substitute for those of
"upper management" and quite naturally reflect their more spe-
cialized, parochial interests. Under these conditions, it is not
surprising to find localized interests predominating over organi-
zational interests and less coordination and integration of the
whole.
24
too explicit about one's intentions. Revealing what one is
going to do suggests (given resource constraints) what one is
(Hammond, 1988:9).
The President may want to change his goals and strategy
rapidly than the DoD can support them. He may prefer incremental
commitment to programs, given political constraints, rather than
long-term commitments that the DoD weapon procurement programs
may require. The President may also want to present and inter-
pret his goals and objectives to different audiences differently.
There is a "need to be able to say different things to different
25
foreign audiences as well as domestic audiences" (Hammond,
1988:12). Keeping a coalition together with multiple and compet-
ing objectives in order to gain passage of legislation requires
some finesse (Baumer, 1978). Opposition can rally or a shaky
coalition can fall apart if clear, unambiguous strategy is artic-
ulated. Under these conditions, it may be of benefit to the
President to be deliberately vague (Nutt, 1979). Thus, there are
26
combat -- are indicators that may take too long to determine, as
in the case of winning, or may be impossible to rectify as in the
case of losing. Reliance on these measures to judge DoD perform-
ance is either too time consuming or too risky.
These dilemmas over performance measures led the former
1983:217).
Policy Implementation
of power.
The Secretary does not control his budget, Congress author-
izes and appropriates it. The process to produce the budget also
is very complex, time consuming, and duplicative, difficult to
administer and coordinate (Gansler, 1989; Hendrickson, 1988;
Jones and Doyle, 1989; Kanter, 1983; Wildavsky, 1988). Con-
gressional budget involvement and oversight, for example, in-
volves "some 30 committees, 77 subcommittees, and 4 panels....
27
Every working day... entails on average almost 3 new General
Accounting Office (GAO) audits of DoD; an estimated 450 written
inquiries and over 2,500 telephone inquiries from Capitol Hill;
and nearly 3 separate reports to Congress each averaging over
1,000 man-hours in preparation and approximately $50,000 in cost.
Senior DoD officials spend upwards of 40 hours preparing for the
6 appearances as witnesses and the 14 hours of testimony that
they provide on average for each day Congress is in session"
(Cheney, 1989:26-27, emphasis in text). In addition, as one OMB
and DoD study found, just to fulfill statute requirements, Con-
28
gence, and special operations. Congress even spelled out the
duties of new officials requested by the Executive Branch in
statutes, details usually left for DoD directives. And it
"broke new ground" when it mandated the establishment of a Uni-
fied Command for special operations and prescribed its composi-
tion and functions in detail (OSD Study Team, 1987a:A-17).
The Secretary of Defense faces other constraints in the
administration of the Department. For example, attempts to
develop a less rigid personnel management system, giving some
degree of flexibility in the hiring and pay of specialized per-
sonnel, as was done in the Navy's China Lake project, has yet to
be authorized by Congress, although endorsed by the Packard
Commission. Base closing, one of many attempts for the DoD to
reallocate its resources and personnel, usually meets stiff
resistance in Congress, especially if the base is in a congress-
person's district.
Decision Making
Given these constraints on the Secretary of Defense in
managing the department, and the complexity of department manage-
29
organizational complexity and self-interest," all characteris-
30
gic planning and fiscal constraints; absence of realistic fiscal
guidance; failure to emphasize the output side of the defense
program; inability to make meaningful JCS program improvements;
insufficient attention in the PPBS to execution and control;
and the length, complexity, and instability of the PPBS Cycle
mands, three (four if you count the Marine Corps) Military De-
partments, and thirty-three major officials within OSD. In time
of war, one additional uniformed Service, the Coast Guard, would
come under the DoD.
Significantly larger than any business, the DoD has over
four million active duty, reserve and civilian employees who work
directly for it, and over three million additional personnel in
the private sector to provide services or products to the DoD
(Brown, 1983:216-217; OSD Study Report, 1987:1-3). In compari-
son, General Motors was ranked by Dun and Bradstreet as the larg-
31
est private employer in 1986 with only 660,000 employees. The
DoD's FY 1987 budget authority was 282 billion was almost three
times the sales of General Motors, the company with the largest
sales volume ($103 billion) and four times that of Exxon, the
second largest company, with $70 million in sales (OSD Study
Team, 1987a:I3-I4).
32
or to structural modify the organization for enhanced coordina-
tion, little can be done, especially for managers at the top, to
"overcome the basic working out of these Laws" (p.143). Brown
(1982) agrees noting that "one of the most pressing problems of
our times is the management of bigness" (1982:74).
33
tell, 1989).
This condition is especially problematic for enterprises
that operate in what are called "turbulent environments," where
new technologies and social, political, and economic forces
require change and adaptation at a rapid rate in order for the
company to stay competitive (Kanter, 1989; Peters, 1988). As
upper management attempts to react to the external forces that
beset them, integration is passed on to staff or others lower in
the hierarchy, or in some cases, is neglected. When this occurs,
the organization looses its direction and focus.
Companies such General Electric have begun to take heed of
firms because they have the ability to monitor sub unit perform-
ance using indicators such as profit and loss, sales and return
34
meet pre-established measures of performance.
Transferring the "small is beautiful" logic to the DoD is
fraught with difficulties, however. Despite its creation as a
single entity in 1947, and despite the evolutionary changes over
the last 40 years which have produced greater consolidation in
the Office of the Secretary of Defense (OSD Study Team, 1987a),
the Department of Defense is still described as a fragmented,
anarchical collection of feudal baronies (Gabriel, 1979; Lutt-
wak, 1985), a "vast conglomerate of quasi-independent agencies"
(Wilson, 1989:211). The services and other powerful actors have
enormous influence in Congress, and depending on the preference
of the Secretary of Defense, exercise a great deal of control in
running their bureaus (SASC, 1985; Odeen, 1985; OSD Study Team,
1987a; Service Secretaries, 1987; Young, 1987).
The Secretary of Defense himself has minimal tools to manage
35
tuted a program to develop a unified, non-duplicative information
system for the department. Secretary of Defense Cheney brought
in Mr. Atwood from General Motors to be in charge of the DoD
comptroller office and install GM's Corporate Information Manage-
ment (CIM) Strategy. According to one analyst, "GM was wrestling
with problems with its information systems that are familiar to
DoD watchers: divisional parochialism, divisional rivalry, not-
invented-here syndrome, duplication, obsolescence, data incompat-
ibilities and attachments to computer architectures that were
more theological than technical in basis" (Haga, 1990:1). This
system is estimated to take at least ten years or more to imple-
ment, although some doubt is thrown on this projection when the
current implementation problems are taken into account (Steele
and Schweizer, 1991).
It is difficult to translate strategic management theory
36
consequence. For "as Galileo once defined it in his square cube
law, a change of size is a change in form, and consequently in
institution (Bell, 1970:68). Based on this reasoning, the DoD
may represent a difference in form, a difference in institution.
Personnel Turnover. The DoD experiences regular, and rapid
turnover of its civilian personnel, particularly Presidential
appointees, as do other cabinet departments. The average tenure
37
example, can take eight to twelve years to develop. A major
38
No other bureau is so visible, so important, and elicits so much
public interest as does the DoD.
The interest has increased of late due to the growing costs
in supporting the department and its mission. Questions such as
"How much is enough" have again surfaced as defense dollars
compete with other critical services and domestic needs (Entoven
and Smith, 1971; Fox, 1988). How these questions will be ad-
39
Quo Acceptance; Building Capacity for Strategic Management; and
system of governance.
Calls for more efficiency and effectiveness are the conse-
quence of inappropriately applying the expectations of a ration-
40
al and comprehensive model of decision making -- a model derived
from organizations having a hierarchical authority structure and
system of controls -- to bureaus that operate in a complex,
straints.
Thus, the solution is to have managers "muddle through" as
best they can (Lindblom (1959;1979). While system coherence is a
concern, the best way to deal with it is by making decisions
incrementally throughout the many subunits of governments, making
41
systems, it is a small price to pay for our current constitution-
al arrangement. Then too, an important consideration for the
they are not the driving force, and should not be the driving
force, in making strategic and organizational decisions.
There are other advantages to having a more decentralized,
pluralistic system, with its redundancies and so-called ineffi-
ciencies. The potential for innovation, adaptation and flexibil-
ity is greater in these systems. Without the weight and com-
plexity imposed by organizational controls and centralized deci-
sion making, there can be greater responsiveness to environmental
change and greater experimentation among the competing centers of
power. In addition, command systems whether they be military or
42
savings achieved by eliminating some redundancies and inefficien-
cies are expected to be less than the opportunity costs incurred
from increasing coordination.
Response # 2: Building Capacity for Strategic Management
The second option begins with the acknowledgment of the
limitations in transferring strategic management to public bu-
reaus. However, it differs from the first option in viewing the
limitations, not as roadblocks that must be endured, but as
elements that are amenable to change and modification.
43
are in place for the future (Ansoff, 1984; Eadie, 1989)
The limitations of strategic management in public bureaus
also may be overdrawn, more a reflection of top management's
self-imposed restrictions rather than evidence of system malfunc-
tioning. Lacking education and experience with strategic manage-
ment, public managers may be too ready to accept "constraints" in
managing their bureaus. Where they have options they may only
see limitations. Where they have autonomy and control, they may
44
these change programs -- be they new DoD structures, systems, or
processes -- would be the foundation on which a fully functioning
strategic management program could be built for the future.
Patterned after other successful change projects in the public
sector, there is reason to expect that, over time, they too could
"fault" with the DoD because it has not made the necessary and
model for the DoD in the first place, and seeks to find innova-
tive alternatives in its stead.
45
tional strategy at all (Astley and Van de Ven, 1983).
46
FIGURE 1
H
Environmental
Adaptation
Entrepreneurial Model
Task
Coordination
L H
L
The entrepreneurial model of strategic decision making in
quadrant 1 is characterized by the search for innovations and new
opportunities. Time is of the essence. Quick, bold responses to
environmental opportunities can give an organization an edge over
competitors. As a result, the decision making authority tends
to rest with an entrepreneur and complex decision processes are
avoided since they slow down the response time. Imagination,
47
than responding rapidly for the purpose of innovation and change.
The Planning Model of strategic decision making describes a
48
integration tends to make organizations inward looking, without
concern for their external environments. If their external
environments change, unaware of their contexts, they often have
been unable to adapt. The U.S. car companies of the 1970s are
good example of this problem. The internal focus on coordination
also has tended to push the organization toward centralized
decision making, since centralized decision making is thought to
be the most efficient and cost effective way to integrate and
coordinate organizational activity.
49
can produce even greater specialization and fragmentation among
the organization's subparts, resulting in less interest and
concern for the organization as a whole. Without some mecha-
nisms to hold the organization together, sub-goals can form and
threaten organizational cohesion. In addition, while organiza-
tional flexibility keeps the organization close to its external
contacts, decentralization involves functional redundancies that
also increase operating costs.
50
a land war in Europe.
The DoD, as do all organizations, must search for the
"right" factors to enhance coordination and integration while
maintaining flexibility and adaptability to the changing context.
51
to could guide strategic action in organizations (Daneke, 1990).
Morgan (1986) provides other innovative suggestions. He
organizations.
Conclusion
52
multiorganizational public bureaus.
Reactions to this analysis are expected to vary. One antic-
ipates at least three general responses as outlined in the last
section of the paper. First, one could accept the status quo and
counsel understanding since managers are doing the best they can
managing public bureaus. Second, one could launch major change
projects to build the necessary and sufficient conditions to make
strategic management work. If there are constraints in the
application of strategic management, then the solution is to
eliminate or change them. Third, in place of the management
concepts from enterprises, one could search for innovative solu-
tions to solve the unique strategic management problems of public
bureaus. If strategic mangement principles are not portable from
enterprise, then the alternative is to invent some that are
appropriate for the unique context.
If one selects either of the first two responses, the task
for the future is clearer, if not easier. Either maintain
things as they are with minimal adjustments, or launch major
change efforts to make the DoD and other public bureaus more
amenable to strategic management. If one selects the third
option, the task is more difficult. While there is some good
news -- we need not look to models from business and industry as
guidelines for bureau strategic mangement -- the bad news is that
we have nothing else to substitute in their place. We have no
models to guide the strategic management of multi-organizational
bureaus operating in very complex and chaotic environments.
53
our limited capacity, at least in the short run, the reader
should be reminded of other DoD innovations. Operations research
54
NOTES
55
opment of detailed plans to put the strategy into practice
(Digman, 1990:8).
In contrast, synoptic strategic management consists of both
strategic planning and strategic controls. Strategic controls
ensure that the chosen strategy is being implemented as antici-
pated and is producing the desired results. Plans, strategic or
otherwise, are not likely to be effective without controls;
controls help decision makers compare actual conditions with
planned conditions, analyze any differences, and make necessary
adjustments. Thus, strategic management is a more encompassing
concept than strategic planning; it also describes a continuous
process rather than the periodic one of strategic planning
(Digman, 1990:7-8).
Strategic management (synoptic) also differs from long-range
planning. Long-range planning tends to assume that current trends
will continue into the future. Long-range plans, therefore, tend
to be linear extrapolations from the present. They require
long-range planners to work backwards from the future to specify
a sequence of decisions and actions necessary to get to the
anticipated future. Consequently, efforts tend to be more fo-
cused on specifying goals and objectives and translating them
into current budgets and programs. The danger is that long-range
planners get locked into a set of decisions and actions that may
not be appropriate if the future differs from their projections
(Bryson, 1988:7-8).
56
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